Government finalizing framework for first PHL’s green bond float

The government is finalizing its sustainable finance framework for the issuance of the Philippines’ first-ever sovereign green bonds, in step with its ongoing effort to mobilize funds for capital-intensive climate adaptation and mitigation projects in the face of worsening global warming, Secretary Carlos Dominguez III said Thursday.

With the Philippines shifting from merely talking about climate change to commencing the implementation of practical adaptation and mitigation projects on the ground, Dominguez said such initiatives will necessarily involve the mobilization of—and thus the need for—a governance structure for “green funds.”

Dominguez said the Securities and Exchange Commission (SEC) has long prepared the country’s capital markets for the demand in green investments, having released numerous guidelines on the issuance of Green, Social and Sustainability (GSS) bonds that adhere to the standards set by the Association of Southeast Asian Nations (ASEAN).

Through its private sector, the Philippines is ahead among its ASEAN peers in accessing climate finance, said Dominguez, the chairman-designate of the Climate Change Commission (CCC) and head of the Philippine delegation in the recent 26th United Nations (UN) Climate Change Conference of the Parties (COP26) summit in Glasgow, Scotland.

Philippine companies have issued US$4.8 billion worth of ASEAN-labelled GSS bonds since 2019. This amount, which is equivalent to 29 percent of the current total of ASEAN-labelled GSS Bond issuances, is the highest in the region, he said.

In preparation for its maiden green bonds offering and the mainstreaming of climate change in the financial sector, the Philippines launched on October 20 its Sustainable Finance Roadmap to serve as the country’s masterplan that will create a synergy between public and private investments in greening the financial system.

Dominguez said the Roadmap incorporates the Philippines’ whole-of-nation approach to harnessing finance in support of the country’s transition to a clean, sustainable and climate-resilient economy.

“We are at the threshold of a new climate-conscious age. All the old practices that put the planet under the peril it is in now must yield to new mitigating practices. This transition will be comprehensive and most promising,” Dominguez said in his pre-recorded keynote speech at the 8th SEC-Philippine Stock Exchange (PSE) Corporate Governance Forum.

Dominguez said three crucial elements of what he called the “blended approach” to climate finance—(1) grants for capacity building, (2) investments for green projects, and (3) subsidies for the financial costs and risks of communities transitioning to a climate-resilient economy—“need fine orchestration to push sustainability projects as quickly as possible.”

“We are also in the process of completing our sustainable finance framework for the issuance of our first-ever sovereign green bonds,” Dominguez said.

He said the delegation to COP26 affirmed the Philippines’ position that developed countries that are responsible for most of the world’s greenhouse gas (GHG) emissions must bear the largest financial burden in the transition to carbon neutrality of developing countries like the Philippines.

“This is the essence of climate justice that the most vulnerable countries have long been fighting for. The Philippines, however, will not wait for the Western nations to get their act together. We are moving ahead with the implementation of actual projects on the ground to enable us to meet our commitments,” said Dominguez.

Dominguez said that because the grants, investments and subsidies needed to fulfill these commitments would come from taxpayers, “accountability and transparency are paramount to ensure prudent use of such funds.”

As head of the Philippine delegation to COP26, Dominguez said he broached a proposal to the World Bank Group (WBG), Asian Development Bank (ADB), and the Asian Infrastructure Investment Bank (AIIB) to help catalyze financial flows to developing countries to enable them to meet their climate change objectives.

This proposal involves the three multilateral development banks (MDBs) setting up a harmonized set of guidelines to determine the viability and sustainability of climate projects.

Under Dominguez’s proposal, the three MDBs will set the standards for transparency and accountability and work together with other similar institutions around the world in ensuring that such standards and guidelines are adopted.

“Trust is a very important commodity in finance. These multilateral institutions are highly capable of creating processes that enhance trust, enforce transparency and encourage prudence,” Dominguez said.

Moreover, the extensive monitoring and well-established vetting processes of these MDBs place them in the best position to provide the seal of good housekeeping that would spur private sector investments in green projects, he said.

“With this reinvention of current standards, the multilateral banks can play a pivotal role in mobilizing the trillions of dollars in private sector financing available for climate adaptation and mitigation projects,” Dominguez said.

Dominguez also stressed the need for innovating financing mechanisms to channel funds to climate and sustainability projects.

He cited as an example the Philippines’ partnership with the ADB for the Energy Transition Mechanism (ETM) facility, which aims to hasten the retirement of coal plants in the country and the shift to clean and renewable energy (RE) sources through an equitable, scalable and market-based approach.

The ADB and the Philippines are set to conduct a full feasibility study focusing on the optimal business model for the Philippines’ ETM-backed project.

Dominguez said the Philippines’ ETM project, which will bring together financial resources from MDBs, private institutional investors, philanthropic contributions and long-term investors could become “a model of cooperation that may be replicated elsewhere in the world where multilateral finance institutions, governments and the private sector are aligned in their climate resiliency goals.” (DOF)